Main Street Capital Corp Stock Climbs Higher. Is MAIN A Buy?

Main Street Capital Corp (NYSE: MAIN) is up 58% for the year and 28% year to date.  As a result, it is one of the most popular monthly dividend stocks I get asked about. The company provides debt and equity for mid-cap companies and pays its shareholders a current yield of 5.92%. The dividend rate is the percentage of a company’s profit distributed to shareholders is expressed as the dollar amount per share paid as a dividend per share.

MAIN invests in lower and middle-market companies through a diversified portfolio that manages investment risk. Its private lending strategy is to issue debt to private companies and enter into strategic relationships with other investment funds. Small and proven risk loans come with higher interest rates.

One of the biggest attractions is that the company increases the upside risk by taking a sizable stake in its portfolio companies. As a result, it can increase its dividends faster than its net asset value. Main Street pays monthly dividends and issues additional dividends throughout the year.

The portfolio consists of 49% of the lower medium-sized market, 26% of private loans, 18% of large individual portfolios of the medium-sized market, and companies limited to no more than 5% of total capital returns. The company offers its services to 181 companies in 25 industries.

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Unfortunately, economic headwinds such as a recession could affect the overall portfolio and downward pressure both dividend payout and the stock’s price. Diversification across business segments and industries, and a mix of debt and equity components, have enabled Main Street Capital to thrive and weather the storm.

Investors in Main Street Capital Corporation got a taste of the bitter downside last year when its share price fell 27%. At least the damage is not so serious if you look at the last three years, as the stock has increased by 21% over that period. However, the 27% decline is well below the market return of 25%. 

On June 24, 2020, Main Street Capital announced that it is abandoning its debt and equity investments in IDX Brokers, LLC, a Software-as-a-Service (SaaS) search and lead management solution that integrates data feeds from real estate professionals. The company made a profit of $9.3 million on the exit. Following the announcement, the company’s stock rose to $31.36 on June 24 from $32.15 the day before.

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Earnings per share are down 78% this year. This isn’t good.  The latest profit corresponds to the most recent earnings per share (EPS) paid to shareholders at the time of distribution. Earnings per share follow the 12-month EP (total operating income, net income before expenses) divided by the weighted average number of common shares outstanding. For example, if a company had a net profit of $10 million and 10 million shares outstanding, its EPS would be $1.

Bottom Line: Is Main Street Capital Corp Stock A Buy?

Many investors watch main Street Capital Corp because of the monthly dividend and the recent increase in share value. Many of these investors are asking if MAIN is a buy. The short answer for me is no. Sorry, but the stock has risen too high for the dividend yield to make sense for the risk.  When I think of dividend stocks, I want solid performers that have low risk and volatility.  If you bought earlier, it might be a good stock to hold onto, but right now, the price is just too high.

Main Street Capital Stock Pivots Price Levels

Pivot Classic Fibonacci Camarilla Woodie DM
S3 30.14 34.18 38.04 33.29
S2 34.18 35.72 38.41 34.51
S1 36.66 36.67 38.78 37.33 37.44
P 38.22 38.22 38.22 38.55 38.61
R1 40.70 39.76 39.52 41.37 41.48
R2 42.26 40.71 39.89 42.59
R3 46.30 42.26 40.26 45.41

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